Over the last few years, there has been a growing trend of corporations purchasing single-family homes across the U.S. Sun Belt region. These corporations are backed by private equity groups, such as Blackstone and Pretium Partners.
While this trend has led to an increase in prices for detached homes, particularly in key Sun Belt states, it has also raised concerns among lawmakers and industry experts about the role of Wall Street in the housing market.
According to a forecast by MetLife Investment Management, institutional investors may control 40% of U.S. single-family rental homes by 2030. This has prompted some lawmakers to call for Wall Street to back away from the market, arguing that the trend could have a detrimental effect on rental prices in the future.
The single-family rental industry began with government backing in the aftermath of the 2008 financial crisis. It provided a rare opportunity for institutions to build a portfolio of foreclosed properties, which attracted the attention of private equity firms and investment managers. Since the early 2010s, companies such as Tricon Residential, Progress Residential, American Homes 4 Rent, and Invitation Homes have each bought thousands of homes. They have also added to the housing supply in some cases with built-for-rent communities.
While some industry advocates argue that institutional investors do not yet control a large market share in housing, the trend suggests that this could change in the coming years. Large institutions owned roughly 5% of the 14 million single-family rentals nationally in early 2022, according to analysts. However, the forecast by MetLife Investment Management indicates that by 2030, the institutions may hold some 7.6 million homes, or more than 40% of all single-family rentals on the market.
The rising trend of corporations purchasing single-family homes has also sparked concerns about the impact on rental prices, particularly in the Sun Belt region. According to research compiled by Zumper, prices in some Sun Belt markets have outpaced national figures for rent inflation. For instance, between January 2020 and January 2023, rents for a two-bed detached home increased about 44% in Tampa, Florida, 43% in Phoenix, and 35% near Atlanta. In comparison, there was a 24% increase nationwide.
The industry advocates argue that institutional investors do not control enough market share to dictate prices in any market. However, the trend suggests that they could have a significant impact on rental prices in the future, particularly if the forecast by MetLife Investment Management holds true.